1. Technical Field
This invention relates generally to a method and system for selecting weighting components of a financial instrument, and more specifically to methods and apparatuses for selecting and weighting components of a financial instrument by revenue or dividends.
2. Discussion of Background Art
Ever since the first stocks were traded on Wall Street in the 1700s, securities brokering has become ever more complicated. The rise of the New York Stock Exchange in 1817 began the formalization of purchases and sales, setting down rules of business. Dating back to these times, traders have attempted to maximize profit on securities trades and brokering.
One relatively common method for maximizing trading profits is the creation of a financial instrument, such as an index or fund. Different, financial instruments may track, represent, and/or include different securities. For example, a small-cap index generally tracks stocks issued by companies having a market capitalization of $250 million to $1 billion. Similarly, certain funds may hold bonds, private equity, public equity, both private and public equity (as in the case of a crossover fund), securities linked to a certain geographic region (i.e., a “regional fund”), securities sharing certain market characteristics (i.e., a “sector fund”), and so forth.
Although various methods for creating and tracking financial instruments exist, many methods for creating and/or weighting financial instruments have been ignored. “Weighting” generally refers to the process of adding certain securities to a financial instrument in amounts corresponding to the relative presence or value of a fundamental datum shared by all securities in the fund universe. Similarly, many different selection criterion for including securities in a financial instrument have yet to be explored. Thus, several strategies for maximizing profit in an open trading forum have not been exploited.
Further, the creation and tracking of financial instruments often does not take dividend payments into account, or does not provide a benchmark to measure the relative value of dividend-paying securities. This is true not only for securities traded or available in the United States, but also those traded or available in other geographic regions such as Europe, Japan, Hong Kong, and so forth. Creation of a financial instrument capable of tracking dividend payments and being weighted accordingly may facilitate the review and understanding of the benefits provided by dividend-paying securities, and may create investment vehicles that generate superior returns, with lower volatility, when compared to funds based on established market-capitalization weighted benchmark indices.
Accordingly, there is a need in the art for an improved financial instrument and method for creating the same. The advantages and benefits of the present invention will be apparent upon reading the following summary and detailed description of the invention.